Stock market

5 Things The Stock Market Taught Me In These Last 5 Years

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At the end of 2019, stock markets were running high. S&P 500 The index continued to set new highs till mid-February 2020. Then CoVID-19 gripped the world, sending share prices plummeting.

By 20 March 2020, US and UK markets had crashed by 35% on growing fears of a global pandemic. Happily, the world bounced back and when an effective vaccine was announced in November 2020, share prices rose.

Five years of ups and downs

As this may be my last silly article, I will share what has driven my stock market success over the past half decade.

1. Sometimes, caution pays off.

In late 2019, my wife asked what to do with our family portfolio. I replied that we should sell everything and go 100% cash.

Pundits claim that this ‘market timing’ is a bad idea. However, my wife put 50% of our wealth in cash, thus avoiding the worst of the spring 2020 crisis.

2. Market crashes present great opportunities.

March 20, 2020 – The 2020 market was low – I was very excited. With stock prices falling, I felt like a kid in a candy store, surrounded by bargains.

Within days, 100% of our wealth was invested in stocks, which have grown exponentially since then. This is another example of how our market timing works.

3. Obsession can be contagious.

During the ‘meme stock madness’ of early 2021, retail investors rushed to buy shares of otherwise ailing companies, quickly becoming a mob mentality.

Various loser stocks skyrocketed, company valuations far outstripped by economic reality. When these meme stocks inevitably crashed to the ground, some wild-eyed investors lost everything. Fortunately, I got rid of that stupidity.

4. Bargain hunting still works.

At the end of 2021, US stocks hit all-time highs, led by mega-cap tech stocks. At the time, I repeatedly argued that they were overpriced and ready to sink.

Within 10 months, the S&P 500 had crashed more than 25%, reversing nearly two years of gains. On this occasion, my wife and I bought six megacap US stocks at bargain prices on November 3, 2022.

Year to date, these bargain basement ‘worst’ US stocks are up more than 50%, while many have nearly doubled. He showed me that I could identify and buy growth stocks using value investing techniques.

5. British bargains abound.

gave FTSE 100 9.1% higher in 2024, yet I see footsie bargains. For example, Legal and General Group (LSE: LGEN) shares, which offer one of the highest yields on the London stock market.

Founded in 1836, L&G is one of Europe’s leading asset managers, looking after £1.3trn of assets for 10m clients. On Friday (May 10), L&G shares closed at 248.6p, valuing the insurance and investment firm at £14.9bn. Over one year, the stock has gained 10%, but over five years it has lost 8.3% of its value.

Over the past year, shares have moved from a low of 203.1p on 25 October 2023 to a high of 259.6p on 31 January. They seem rather ‘bounded’, but I have high hopes for a breakout to send them higher.

Meanwhile, my wife and I own the stock for its passive income, which is currently running at 8.2% annually. Of course, this payout could fall if stock markets melt again, as they did in 2020. But we are playing a long game!

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